Singtel: Associates Show Positive Signs Despite Unhelpful Australian Dollar Weakness

We decrease our fair value estimate for narrow-moat Singtel Z74 to SGD 2.52 from SGD 2.62 previously following the release of a broadly in-line fiscal 2023 (year-ended March 2023) result. The decrease was mainly due to currency and associate share price updates. Singtel’s fiscal 2023 operating revenue declined 4.7% year on year with EBITDA down 2.2% year on year and EBIT before associates’ contributions up 6.4%. Associates’ contributions, up 7.1% year on year, drove underlying net profit up 6.8%. Assuming constant currencies, revenue would be down 1.7%, EBITDA was up 1%, and net profit was up 11.2%. We retain our narrow moat rating for Singtel. Our fair value estimate implies a price/earnings ratio of 19 times for Singtel, which is slightly ahead of its average over the past 10 years. On our valuation, the associate businesses are worth around 80% of the total value of Singtel with the remainder from Singtel’s consolidated Singapore and Australia businesses. Our forecasts assume a fiscal 2024 dividend of 10.1 cents per share, which would imply around a 4% dividend yield.